Bottom Line: To improve manufacturing efficiency and achieve maximum output without sacrificing quality or safety, manufacturers need to excel at eliminating inefficient and unproductive processes.
Regardless of the products being produced on their shop floors daily, all manufacturers share a high priority: improving manufacturing efficiency without sacrificing quality or safety. However, the best manufacturing leaders, plant managers, and teams don’t always achieve efficiency goals.
Spiraling operating costs, including labor, lack of workers, and less time to eliminate inefficient processes, are making efficiency gains an elusive goal. For example, U.S. manufacturers’ labor costs are 16% greater than the rest of the world overall and as high as 30% higher in the electronics and apparel industries, according to KPMG and The Manufacturing Institute’s recent study, Cost of Manufacturing Operations Around The Globe.
The need to eliminate inefficient processes has never been greater, given how short-handed manufacturers are today. 45% of manufacturing executives are turning down business opportunities due to a lack of workers. Eight out of every ten manufacturers (83%) say attracting and retaining a quality workforce is their top focus today. The Manufacturing Institute and Colonial Life’s recent study published last month found that 93% of manufacturers interviewed have unfilled positions in their companies and are struggling to find qualified applicants. Sign-on bonuses and the freedom to define their work schedules are more important than healthcare insurance.
The Most Costly Unproductive Processes
The processes that require manual workarounds or tweaking an ERP, MES, or WMS system often drain manufacturing efficiency and time the most. This is because workers must stop what they’re doing, perform manual tasks, or complete a non-standard process or machine workflow to get their work done.
Standard Operating Procedures (SOP) are the cornerstone of continuous improvement across any manufacturing business. When SOPs aren’t consistently applied, inefficient processes flourish.
Eliminating unproductive processes in these areas has proven effective in improving manufacturing efficiency:
- Accounting & finance, production, and supply chain data are disorganized across spreadsheets leading to manual, time-wasting processes. Spiraling labor & shipping costs, unpredictable supply chains, and customers asking for price breaks are exposing the many weaknesses of attempting to run production operations on spreadsheets alone. Accounting & production planners waste weeks valuing and tracking inventories so they can commit to orders at a profitable margin. In the end, it’s guesswork when production runs on spreadsheets alone.
- Performing cycle counts, inventory audits, order fulfillment & month-end closings manually is a significant time sink. Outside of labor costs, inventories are often the manufacturer’s most expensive asset. Getting cycle counts, inventory audits, knowing inventory turns, and order fulfillment rates right can mean the difference between being profitable or not. Done manually and with no consistent SOP, these can be one of the most inefficient processes for manufacturers.
- Defect tracking across production is batch-based is a process that needs to end now. Nothing destroys manufacturing efficiency faster than building an order two or more times to get it right for a customer. Yet batch-based or sequential defect tracking lets that happen by not providing defect data in real-time. So when manufacturers have to wait for the end of the day or week to get defect tracking data, chances are their Return Material Authorizations (RMA) are above average for their industry, and their efficiency lags the competition considerably.
- Each shipping label is entered by hand “because that’s how we’ve always done it” is the process that costs customers. With customers’ production lines waiting on a new shipment of components, parts, or subassemblies to get their orders done, manually producing shipping labels is one of the riskiest, most inefficient processes. Customers have been lost because shipping labels were created manually to preserve the status quo and not automate it.
- Production scheduling is reactive with no visibility of customer demand, creating confusion across shop floors. Spreadsheets and whiteboards can’t keep up with how fast on-hand inventory balances can change and don’t capture items manufactured internally and outsourcing inventory. This inefficient process steals production time, leading to less customer responsiveness and the potential of losing a customer if late shipments go on too long. Eliminating this unproductive process, like creating shipping labels by hand, will reduce the risk of losing customers by not meeting ship dates for orders.
Tips for Improving Manufacturing Efficiency
The most unproductive manufacturing processes that drain cash and time have something in common: getting rid of them needs to start with more accurate, real-time data. Achieving maximum output without sacrificing quality or safety is a data-driven strategy.
Here are the most proven tips for improving manufacturing efficiency with better data:
- When Accounting, Finance, ERP, and MES systems share the same data, achieving more in less time is possible. The more real-time and relevant the data, the faster manufacturers can react to risks and capitalize on opportunities. In addition, organizing accounting, finance, production, and supply chain data on a unified platform helps eliminate ineffective processes by providing greater visibility and control of costs. The more challenging costs, labor, and supply chains get, the more critical it is to have every system sharing the same database.
- Real-time production and process monitoring insights into shop floor operations help spot unproductive processes and quality problems before they get out of control. Real-time production and process monitoring allow manufacturers to track scrap, identify potential gaps in product and process quality levels and track standard cost variations. In addition, lead-time production and process data change the speed of shop floor operations, removing the roadblocks to getting more done by providing the data needed to make decisions.
- Replace batch-based defect and quality monitoring with real-time quality. Unproductive processes in quality can kill a company faster than any competitor can. Stopping a defective product build before it leaves the factory, knowing defect, scrap, and yield rates in real-time, and not having to wait until the end of the day for quality reports are table stakes. Without them, manufacturers are flying blind and letting destructive processes define their direction.
- Automating inventory & warehouse management increases accuracy and drives greater cost-saving efficiencies. Staying with a manual approach to inventory and warehouse management “because that’s how we’ve always done it” is like handing over your best customers to a faster, more automated competitor. Because sooner or later, they will end up there. Unproductive processes are the most expensive when they involve inventories and warehouses. There’s no excuse given how fast costs rise and supply chains are being disrupted for not automating inventory and warehouse management.
- Break the cycle of manual scheduling and save your customers, costs, and time. Just as it is unproductive to manually schedule a week of meetings – down to calling each person to meet with – it’s the same but on a much greater pain scale when planning production for a day. Production schedules need to be automated to increase efficiency and accuracy. The best manufacturing scheduling systems consider demand, current work orders, and projected on-hand balances, scheduling work orders only when manufacturing is necessary. Best-in-class systems also support Forecasting & Production Planning and have real-time integration with order entry and sales order modules. Look for Scheduling systems that also support Material Requirements and Resource Planning that includes items manufactured internally and outsourced inventory.
Spiraling materials and supply costs, a chronic labor shortage, and supply chain disruptions make the goal of manufacturing efficiency challenging. Manufacturing businesses need to identify and eliminate inefficient processes to stay competitively strong in the face of tough new challenges. By starting with the five tips provided, manufacturers can identify unproductive processes and remove them to improve manufacturing efficiency.